John Grobe

A little while ago, I wrote an article about commonly held misconceptions about the Thrift Savings Plan. That article addressed the most common misconceptions, those about: 1) the 10% early withdrawal penalty (it will not apply if you separate and withdraw money in the year in which you turn 55 or later – 50 for special category employees); 2) the fact that you only have one TSP account, even if you have separate Roth and Traditional balances (and the potential tax problems this causes); and 3) that you can fund both the TSP and an IRA (they are two different animals).

There are more misconceptions about the Thrift Savings Plan, though they are not as common as the ones covered in the previous article; this article will take a brief look at them.


The TSP is an individual account (not a joint account) and you can only roll money into it from a qualified individual account that is yours. You cannot roll your spouse’s 401(k) from a prior employer or your spouse’s IRA into your TSP. If your spouse has qualified money that they wish to roll over, they can set up an IRA in their name with another custodian.

The TSP can only be funded two ways: by payroll deduction or by a rollover from a qualified plan. If you have money in a non-qualified account, it cannot be deposited in the TSP. So, money in your brokerage account, Aunt Karen’s bequest, lotto winnings, etc. cannot go into the TSP.

Catch up contributions no longer have to be separate from regular contributions. This is extra confusing because, up until this year, we have been telling you that catch up contributions have to be separate, and that you risked losing the government match if you simply added the catch up amount ($6,500 in 2021) to your regular elective deferral amount. Forget everything we told you about catch up contributions; now, when you are old enough (i.e., when you reach the year in which you turn 50) you simply increase your regular contribution by the catch up amount. If you were contributing the maximum ($19,500 in 2021), you would simply increase it by the $6,500 catch up contribution and make your contribution amount $26,000. This is a case of something that was a misconception in 2020 in no longer a misconception in 2021, and vice-versa.

Contribution allocations and interfund transfers are two separate actions and affect your TSP account differently. A contribution allocation change only affects the money you are putting into the TSP; it does not re-allocate money already there. An interfund transfer only re-allocates money that is already in your TSP, it does not change future contributions.

TSP: Common Misconceptions

TSP Early Withdrawal Penalty Myth

Rollovers: Moving Your Money Out of the TSP

What it Takes to Be a TSP Millionaire

Yes It’s OK to Spend Your TSP in Retirement

FERS Retirement Planning Bundle: 2022 FERS Guide & TSP Handbook